The Structure of the International Coal Trade in Transition

INTRODUCTION In the past decade, the international coal trade has been undergoing a period of gradual change. This change will continue through the remainder of this century until by the year 2000 the international coal industry will look very different from the industry which existed in the early 1970's. The industry which will emerge from the thirty year period of change (1970-2000) will be different in many ways. -The volumes of coal transported will be much larger. - The primary type of coal traded will be steam coal rather than metallurgical coal. - A much broader group of countries will be participating in the trade both as suppliers and as consumers. - The trade will be dominated by a relatively small number of large producing and trading companies. - The coal mined for international shipment will be primarily surface- mined. – The United States will play a decreasingly important role in international coal trade. In the course of this paper I propose to address three questions which are crucial to the formulation of an understanding of the changes outlined above : (1) Which supplier nations will be most successful in the international metallurgical and steam coal trade in the next decade and a half? (2) What emerging trends will shape the international coal trade in the 1980's and 19901s? (3) Where are U.S. producers likely to fit in this scheme of things? As a background to my remarks, I should note that what follows is based on five years of work in a consulting capacity on coal supply and demand issues worldwide. Although in the course of this work I have had occasion to develop mining and transportation cost figures for all of the countries discussed below--both my own and those obtained from coal producers--it is apparent that success in the marketplace can be determined in some instances by considerations other than costs. Nevertheless, my comments today about international competitiveness will be dominated by cost considerations; there are, after all, not many markets that reward the high-cost producer with success. Let us begin by establishing some criteria for success in the international coal market and then compare some of the producer nations to some of these criteria. The criteria are: - Low delivered cost, - Good quality coal, - The producer's partnership in a joint mining venture with an importer or a consumer of coal, - The producer's international business orientation and commitment to penetrating the market, - The producer's reliability as a supplier, and - Political pressure exerted by the producing country on consumers.